Cia Part 1 - Su 1: Mandatory Guidance

Front 1

Define Internal Auditing

Back 1

An independent, objective assurance and consulting activity designed to add value and improve and organization's operations. It helps an organization accomplish its objectives by bringing a systematic, disciplined approach to evaluate and approach to evaluate and improve the effectiveness of risk management, control, and governance processes.

Front 2

4 Purposes of the Standards

Back 2

1. Delineate basic principles that represent the practice of internal auditing

2. Provide a framework for performing and promoting a broad range of value-added internal auditing

3. Establish the basis for the evaluation of internal audit performance

4. Foster improved organizational processes and operations

Front 3

Attribute Standards are numbered in the?

Back 3

1000s

Front 4

Performance Standards are numbered in the?

Back 4

2000s

Front 5

What do Attribute Standards govern

Back 5

The responsibilities, attitudes, and actions of the internal audit activity and the people who serve as internal auditors

Front 6

What do Performance Standards govern

Back 6

The nature of internal auditing and provide quality criteria for evaluating the internal audit function's performance

Front 7

What are Interpretations

Back 7

Provided by the IIA to clarify terms and concepts referred to in Attribute or Performance Standards

Front 8

What do Implementation Standards do

Back 8

Expand upon the individual Attribute or Performance Standards that apply to all internal audit engagements, and describes the requirement of either an assurance or a consulting engagement

Front 9

IPPF stands for?

Back 9

International Professional Practices Framework

Front 10

Three parts to Mandatory Guidance

Back 10

1. Definition of Internal Auditing

2. Code of Ethics

3. The Standards

Front 11

Three parts to Strongly Recommended Guidance

Back 11

1. Position Papers

2. Practice Advisories

3. Practice Guides

Front 12

Purpose of the Internal Audit Activity

Back 12

Provide independent, objective assurance and consulting services designed to add value and improve and organization's operations. The internal audit activity helps an org accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effective of governance, risk management, and control processes

Front 13

Authority of the Internal Audit Activity

Back 13

Support of management and board is crucial when inevitable conflicts arise. The internal audit activity should be empowered to require auditees to grant access to all records, personnel, and physical properties relevant to the performance of every engagement

Front 14

What must the charter for the internal audit activity do?

Back 14

Define the internal audit activity's purpose, authority, and responsibility. It should contain a grant of sufficient authority. Final approval of the charter resides with the board

Front 15

Responsibility of the internal audit activity

Back 15

Provide assurance and consulting services that will add value and improve operations. Specifically, the activity must evaluate and improve the effectiveness of the organization's governance, risk management, and control processes.

Front 16

As part of federal law, what acts should an internal auditor be aware of?

Back 16

Racketeer Influenced and Corrupt Organizations Act

Foreign Corrupt Practices Act

Sarbanes-Oxley Act

Front 17

RICO Act - Why?

Back 17

Combat the problem of organized crime - eliminate organized crime by concentrating on the transfer for illegal monies

Front 18

RICO Act - what do the criminal provisions provide for?

Back 18

Fines and prison sentences

Front 19

RICO Act - what do the civil provisions provide for?

Back 19

Awarding of treble damages and attorney's fees to the successful plaintiff

Front 20

What activities specifically does the RICO Act make unlawful?

Back 20

1. Conspiring to commit any of the below offenses

2. Using income to derive from a pattern of racketeering activity to acquire an interest in an enterprise

3. Acquiring or maintaining an interest in an enterprise through a pattern of racketeering activity

4. Conducting the affairs of an enterprise through a pattern of racketeering activity

Front 21

Unforeseen consequences of the RICO Act

Back 21

1. Used against insider traders, MLB, anti-abortion protesters, and accounting firms - not intended by Congress

2. Investment bank Drexel Burnham Lambert and former employee Michael Milken threatened with indictment under RICO in late 1980s for trading on inside information

Front 22

Foreign Corrupt Practices Act of 1977 - why?

Back 22

In response to the flood of bribes handed out by US companies to foreign government officials, a phenomenon that came to light during the Watergate investigations of 1973-74

Front 23

Provisions of Foreign Corrupt Practices Act

Back 23

1. All public companies must devise and maintain a system of internal accounting control, regardless of whether they have foreign operations

2. Public companies may not make corrupt payments to any foreign official, foreign political party or official thereof, or candidate for political office in a foreign country

Front 24

Penalties of violating the Foreign Corrupt Practices Act

Back 24

Individuals - fine and imprisonment

Corporation - Fine

Front 25

Sarbanes-Oxley Act of 2002 - why?

Back 25

Response to the numerous financial reporting scandals of late 2001 and early 2002

Front 26

SOX - what does it do?

Back 26

Imposes specific governance practices on issuers of publicly traded securities

Imposes specific reporting requirements, among them a provision that the CEO and CFO must certify to the effectiveness of the system of internal control

Front 27

SOX - governance practices on issuers of publicly traded securities

Back 27

1. Each member of the issuer's audit committee must be an independent member of the board

2. At least one member of the AC must be a financial expert

3. AC must be directly responsible for appointing, compensating, and overseeing the work of the independent auditor

4. The independent auditor must report directly to the audit committee, not to management

Front 28

SOX - Penalties

Back 28

Criminal penalties provided for those who conceal or destroy accounting or other records in an attempt to obstruct an investigation

Front 29

5 Control Frameworks

Back 29

1. COSO - Internal Control - Integrated Framework

2. CoCo - Guidance on Control

3. Turbull Report - Internal Control: Guidance for Directors on the Combined Code

4. COBIT - Control Objectives for Information and Related Technology

5. eSAC - Electronic Systems Assurance and Control

Front 30

COSO Framework

Back 30

- Internal Control - Integrated Framework

- Most prominent control framework in the US

- Published in 1992, updated 1994

- Issued by Committee of Sponsoring Organizations of the Treadway Commission

Front 31

CoCo

Back 31

- Guidance on Control

- Published 1995 by the Canadian Institute of Chartered Accountants

Front 32

Turnbull Report

Back 32

- Internal Control: Guidance for Directors on the Combined Code

- Named for Nigel Turnbull, chair of the committee that drafted the report

- Originally published in 1999 and rereleased in 2005

- By The Financial Reporting Council of the UK

Front 33

COBIT

Back 33

- Control Objectives for Information and Related Technology

- Best-known framework specifically for IT controls

- Version 4.1 published 2007 by the IT Governance Institute

Front 34

eSAC

Back 34

- Electronic Systems Assurance and Control

- Alternative control model for IT

- Publication of the Institute of Internal Auditors Research Foundation

Front 35

Which Standards expand upon other categories of Standards?

A. Performance Standards

B. Attribute Standards

C. Implementation Standards

D. All are correct

Back 35

C - Implementation Standards.

Implementation Standards expand upon the Attribute and Performance Standards, and provide requirements applicable to specific engagements

Front 36

What do Implementation Standards apply to?

Back 36

Specific types of engagements

Front 37

What do Performance Standards do?

Back 37

Describe the nature of internal auditing and provide quality criteria for evaluation of internal audit performance

Front 38

What to Attribute Standards concern?

Back 38

The characteristics of organizations and parties providing internal auditing services

Front 39

Primary purpose of a code of ethical conduct

Back 39

Promote an ethical culture among professionals who serve others

Front 40

Additional functions of a code of ethical conduct

Back 40

1. Communicating acceptable values to all members

2. Establishing objective standards against which individuals can measure their own performance

3. Communicating the organization's values to outsiders

Front 41

Typical components of a Code of Ethical Conduct

Back 41

1. Integrity - a refusal to compromise professional values for person gain, and performance of professional duties in accordance with relevant laws

2. Objectivity - commitment to unbiased information, and independence from conflicts of economic or professional interest

3. Confidentiality - refusal to use organization information for private gain

4. Competency - A commitment to acquiring and maintaining an appropriate level of knowledge and skill

Front 42

What does a code of ethics need to be effective

Back 42

The code must provide for disciplinary action for violators

Front 43

Purpose of Code of Ethics

Back 43

Promote an ethical culture in the profession of internal auditing

Front 44

Two essential components of the Code of Ethics that extend beyond the Definition of Internal Auditing

Back 44

1. Principles that are relevant to the profession and practice of internal auditing

2. Rules of Conduct that describe behavior norms expected of internal auditors.

Front 45

Rules of Conduct - Integrity

Back 45

1.1 Perform with honesty, diligence, and responsibility

1.2 Observe the law and make disclosures expected by the law and the profession

1.3 Shall not knowingly be a part to any illegal activity, or engage in acts that are discreditable to the profession of internal auditing or the organization

1.4 Respect and contribute to the legitimate and ethical objectives of the organization

Front 46

Rules of Conduct - Objectivity

Back 46

2.1 Shall not participate in any activity/relationship that may impair/be presumed to impair their unbiased assessment, including activities/relationships in conflict with the interests of the organization

2.2 Shall not accept anything that may impair or be presumed to impair their professional judgment

2.3 Shall disclose all material facts known to them that, if not disclosed, may distort the reporting of activities under review

Front 47

Rules of Conduct - Confidentiality

Back 47

3.1 Be prudent in the use and protection of information acquired in the course of their duties

3.2 Shall not use information for any personal gain or in any manner that would be contrary to the law or detrimental to the legitimate and ethical objectives of the organization

Front 48

Rules of Conduct - Competency

Back 48

4.1 Engage only in those services for which they have the necessary knowledge, skills, and experience

4.2 Perform services in accordance with the International Standards for the Professional Practice of Internal Auditing

4.3 Continually improve their proficiency and the effectiveness and quality of their services

Front 49

Attribute Standard 1000

Back 49

Purpose Authority, and Responsibility - must be formally defined in the internal audit charter

Front 50

Attribute Standard 1010

Back 50

Recognition of the Definition of Internal Auditing, the Code of Ethics, and the Standards in the Charter (mandatory)

Front 51

Chief Audit Executive (CAE)

Back 51

A person in a senior position responsible for effectively managing the internal audit activity in accordance with the charter and the Definition of Internal Auditing, the Code of Ethics, and the Standards

Front 52

The Board

Back 52

An organization's governing body, such as a board of directors, supervisory board, head of an agency or legislative body, or any other designated body of the organization, including the audit committee, to whom the chief audit executive may functionally report.